OPEC+ to advise committee on oil cut extension
The Joint Ministerial Monitoring Committee (JMMC), an OPEC+ advisory panel, concludes its two-day meeting today and is expected to provide guidance on future production cuts for the oil cartel.
OPEC+ has remained committed to reducing production by 9.7 million barrels per day (bpd), a figure agreed upon during its emergency April meeting. These cuts represent approximately 10% of global supply, but they are set to expire at the end of July following a one-month extension. If this week’s meeting reaches a positive consensus, the cartel will follow its original schedule and ease cuts to 7.7 million bpd in August.
Cooperation within the cartel has thus far been effective in supporting global oil prices through the current economic downturn. Riyadh and Moscow settled previous disagreements over production cuts that tanked oil prices in order to protect their domestic economies and stabilise global markets. Furthermore, the two countries have increased pressure on non-compliant members to fulfil their commitments. June numbers now show that Iraq and Nigeria, historically non-compliant members, have made meaningful reductions in daily output while pledging to be fully compliant by the end of summer.
Consensus within the cartel points to a shared understanding of the threat that the pandemic represents; a second wave of COVID-19 cases could crush oil prices again. However, if JMMC deems current market conditions favourable, expect the cartel to pursue its current short-term goal of gradually increasing daily output.
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